WASHINGTON -- The United States is making progress in its trade relations with China,  US Vice President Dick Cheney said Wednesday.

Speaking to the U.S. manufacturers, Cheney said new Treasury Secretary Henry Paulson, who has been to China twice and is to go again next month, has used contacts in China from his former job with an investment banking firm to press U.S. interests there.

Still, Cheney said, China's attitude toward such problems as intellectual property -- patents, copyrights and the like -- is difficult to deal with, "but we hammer and hammer and hammer at it."

Overall, "I sense we're making progress where China is concerned. It's always been a source of frustration for a lot of us," he told members of the National Association of Manufacturers.

Figures released Tuesday showed that the United States had a record high trade deficit in 2006, and China held the largest balance of trade surplus against the United States ever enjoyed by a single country. It was the fifth year in a row for both those statistics.

Cheney listed intellectual property protection and China's currency valuation as major problems between the two countries. He said China was allowing the currency to float.

Many U.S. business leaders and politicians contend that China keeps its currency at an unrealistically low value compared to the dollar. That makes U.S. products more expensive in China and Chinese products cheaper in the United States. China agreed in 2005 to a restricted float for the yuan, and it has increased in value against the dollar by about 6.5 percent since then. 

Despite trade, currency and other economic problems with China, the United States has diplomatic reasons to move cautiously with its criticism. The Chinese were given much credit for Tuesday's agreement with North Korea that the Bush administration calls a breakthrough in its efforts to end the North Korean nuclear weapons program.